Heralding a possible trend, the Jharkhand government has decided to roll out direct benefit transfer (DBT) scheme for disbursing kerosene subsidy to consumers in the state’s six districts, starting October 2.

In FY16, oil marketing companies’ under-recoveries on kerosene was Rs 11,496 crore, 42% of their total losses in the sale of petroleum products. (Reuters)

Heralding a possible trend, the Jharkhand government has decided to roll out direct benefit transfer (DBT) scheme for disbursing kerosene subsidy to consumers in the state’s six districts, starting October 2. While the DBT-kerosene scheme, unlike the hugely successful PAHAL scheme for LPG, is still to gain ground owing to the states’ diffidence, Jharkhand’s move has come as morale-booster for the Centre.

In FY16, oil marketing companies’ under-recoveries on kerosene was Rs 11,496 crore, 42% of their total losses in the sale of petroleum products.

PM Narendra Modi has asked states to start DBT for kerosene by way of cash incentive of 75% of subsidy savings in the first two years, 50% in the third year and 25% in the fourth year.

“Jharkhand has written to the Centre agreeing to start DBT for kerosene in six districts starting October 2,” a senior official told FE. In FY16, Jharkhand consumed 2.6 lakh kilolitres of subsidised kerosene. In the first quarter of FY17, the state has lifted 62,000 kilolitres of PDS kerosene.

The country consumes about 70 lakh kilolitres of the fuel, mostly used for lighting by the users, annually, while substantial quantities of PDS kerosene are diverted for adulteration of petrol and diesel.

Petroleum minister Dharmendra Pradhan informed the Lok Sabha on Monday that with a view to reaching the subsidised kerosene to the targeted beneficiaries, it has been decided to implement direct benefit transfer in kerosene (DBTK) during 2016-17.

Modi, who met state chief ministers last month at the interstate council meeting, urged them to take voluntary steps towards reducing kerosene consumption. Karnataka is the first state that has opted for reducing its PDS kerosene quota to 90,000 kilolitres against a sanction of 5.09 lakh kilolitres The state would gain R70 crore from taking this step.

The Centre is of the view that with rapid growth in new domestic LPG connections even in rural areas, fewer families are in need of kerosene as cooking fuel. Moreover, in the past two years of the current government, 8,960 villages have been electrified, meaning there would be less kerosene consumption for lighting.

Under a formula adopted last fiscal, the government is paying Rs 12 per litre subsidy on kerosene under the PDS while under-recoveries over and above that was largely borne by oil explorers ONGC, Oil India and Gail. Out of Rs 11,500 crore kerosene under-recovery 2015-16, the Centre’s subsidy share was about Rs 9,200 crore while upstream oil firms absorbed R1,980 crore. Oil marketing companies bore about R300 crore.

The Budget in FY17 has provided Rs 26,947 crore for fuel subsidy in the current fiscal: Rs 19, 803 crore for LPG and Rs 7,144 crore for kerosene.